10-KPeriod: FY2002

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2002

Filed August 28, 2002For Securities:GPN

Summary

GLOBAL PAYMENTS INC. (GPN) filed its 2002 Form 10-K, detailing its performance for the fiscal year ended May 31, 2002. The company, a significant player in electronic transaction processing, demonstrated robust revenue growth driven primarily by strategic acquisitions in Canada, including those from National Bank of Canada and CIBC. This expansion has positioned GPN as a leading independent acquirer in the Canadian market. Financially, the company reported increased revenues and operating income, alongside improved operating margins when normalized for restructuring charges. GPN also highlighted a significant net income increase due to higher transaction volumes and improved operational efficiencies. The company's strategy remains focused on leveraging its existing infrastructure, expanding its direct merchant services, and exploring new markets like electronic commerce. Despite challenges like increasing competition and regulatory considerations due to its association with CIBC, GPN appears to be on a growth trajectory, supported by strong operational execution and a clear strategic vision for continued expansion in electronic payment processing.

Key Highlights

  • 1Revenue increased by 31% to $462.8 million, driven by acquisitions in Canada (CIBC, Imperial Bank, National Bank) and growth in direct merchant services.
  • 2Operating income grew by 35% to $71.4 million, with normalized operating income increasing by 36% to $82.4 million, indicating improved profitability and operational efficiency.
  • 3The company adopted SFAS No. 142, discontinuing amortization of goodwill and certain intangibles, which reduced amortization expense by $7.4 million in fiscal 2002.
  • 4Strategic acquisitions, including National Bank of Canada's merchant acquiring business for $45.9 million and the buyout of MasterCard International's minority interest, bolstered market position and capabilities.
  • 5Global Payments' focus remains on expanding its direct merchant services, which constitute approximately 80% of its merchant services revenue, with a strategic emphasis on the mid-market segment.
  • 6The company anticipates continued growth, projecting fiscal 2003 revenue between $495 million and $514 million, representing 7% to 11% growth.

Frequently Asked Questions

Revenue growth was primarily driven by strategic acquisitions in the Canadian market, specifically the merchant acquiring businesses of CIBC and National Bank of Canada, as well as the acquisition of Imperial Bank. Additionally, continued expansion in its direct merchant services business and growth through its Independent Sales Organization (ISO) channel contributed significantly to revenue increases.

The adoption of SFAS No. 142, 'Goodwill and Other Intangible Assets,' effective June 1, 2001, eliminated the amortization of goodwill and certain other intangible assets. This resulted in a decrease in amortization expense by $7.4 million in fiscal year 2002 and a one-time write-off of a trademark valued at $24.6 million, recorded as a cumulative effect of a change in accounting principle.

Global Payments' strategy centers on growing its domestic and Canadian presence, strengthening its ISO sales channel, enhancing customer satisfaction, pursuing profitable acquisitions, and developing improved products and services. For fiscal year 2003, the company expects revenue to be between $495 million and $514 million (7-11% growth) and diluted earnings per share to be between $1.35 and $1.41 (10-15% growth).

The company operates under banking regulations due to CIBC's significant equity interest, which may limit its ability to expand into unrelated businesses. It also faces competition from other independent processors and financial institutions. The company manages risk through collateral and operational procedures for merchant processing and check guarantee services, and it is exposed to interest rate fluctuations on its variable rate credit facilities and foreign currency fluctuations, though deemed not material in the near term.